US banks post solid third-quarter loan growth but face more competition for deposits
JPM•JPMorgan Chase, Citigroup, Wells Fargo and Bank of America reported higher net interest income and loan growth in the third quarter, while customers sought higher-yielding alternatives. Citigroup and Wells Fargo increased credit-loss provisions as banks faced pressure to raise deposit rates.
1. Loans and deposits grow
Citigroup reported average deposits up 11% and average loans up 12%. Wells Fargo said deposits rose 10.7% and loans increased 11%, while JPMorgan reported deposit growth of 4% and loan growth of 2%. Bank of America’s average deposits rose 2% and average loans and leases grew 6%.
2. Funding and credit pressures
Rising Treasury yields led customers to seek better returns elsewhere, prompting lenders to raise deposit rates and putting pressure on margins. JPMorgan’s deposit margin fell to 2.78% from 2.79% a year earlier, while Wells Fargo’s net interest margin on a taxable basis declined to 2.43% from 2.61%. Citigroup and Wells Fargo increased provisions for credit losses.
3. Economic outlook
JPMorgan CFO Jeremy Barnum said internal data did not show consumers shifting away from discretionary items. Bank of America CEO Brian Moynihan said client activity continued to point to a resilient and growing US economy. Analysts said there had been no significant cracks in overall bank credit quality, while a weakening labor market and rising living costs could pressure borrowers.
